Capstone Energy Services


US Gas Futures Settle Near 3-Week Low

July 29th, 2011

NEW YORK (Dow Jones) – A larger-than-expected weekly increase of U.S. inventories pushed natural-gas futures lower Thursday, as traders looked past weather forecasts supportive of prices.

Natural gas for September delivery settled down 7.4 cents, or 1.7%, at $4.244 a million British thermal units on the New York Mercantile Exchange.

Futures settled at their lowest price since July 11 and fell as low as $4.200/MMBtu after the Energy Department released its inventory data.

The Energy Information Administration said U.S. natural-gas stockpiles rose by 43 billion cubic feet last week, above the 41-bcf gain predicted by analysts surveyed by Dow Jones Newswires.

A heat wave last week was expected to result in a smaller build than previous weeks, but the injection still surpassed expectations.

“It caught everybody by surprise,” said John Woods, a trader with JJ Woods Associates.

The benchmark contract then made “a nice technical move,” Woods noted, by falling to $4.20, below the 200-day moving average.

High levels of production have continued to outpace demand for natural gas. Offshore production in the Gulf of Mexico accounts for about 7.4% of U.S. natural-gas production, but the threat of Tropical Storm Don wasn’t enough to push prices higher during Thursday’s session.

About 2.8% of natural-gas production in the Gulf was shut down because of the storm Thursday, the Bureau of Ocean Energy Management, Regulation and Enforcement said.

The small amount of production affected in the Gulf has restricted price response so far, said Jim Ritterbusch, head of trading advisory firm Ritterbusch & Associates, in a client note.

Still, updates to temperature views for the next two weeks are supportive of prices and “capable of a renewed price rally of some 20-25 cents with any additional assistance from fresh tropical storm events,” Ritterbusch wrote.

Above-normal heat is sticking across much of the eastern half of the country, and temperatures are expected to near 100 degrees in the Mid-Atlantic states and in the southern Plains in the coming days.

The heat will extend from the Midwest to the Northeast again in the six- to 10-day forecast, MDA EarthSat Weather said.

Tropical Storm Don has sustained winds near 45 miles per hour and is expected to gradually strengthen as it moves toward the Texas coast, making landfall Friday night or Saturday, the National Hurricane Center said.

Rainfall from the storm could bring relief for Texas from ongoing hot weather and drought, but this could also lower demand for natural gas as less electricity may be needed to be generated for cooling.

FUTURES                            SETTLEMENT                        NET CHANGE
Nymex September                  $4.244                                        -7.4c
Nymex October                      $4.257                                        -7.6c
Nymex November                   $4.369                                         -7.7c

CASH HUB                                 RANGE                               PREVIOUS DAY
Henry Hub                               $4.39-$4.455                             $4.41-$4.48
Transco 65                              $4.34-$4.45                                 $4.42-$4.49
Tex East M3                            $4.65-$4.80                                 $4.75-$4.8225
Transco Z6                               $4.75-$5.50                                 $4.85-$5.00
SoCal                                       $4.40-$4.47                                 $4.43-$4.49
El Paso Perm                           $4.22-$4.38                                  $4.34-$4.40
El Paso SJ                               $4.14-$4.21                                   $4.22-$4.24
Waha                                        $4.30-$4.39                                  $4.39-$4.42
Katy                                          $4.34-$4.41                                  $4.38-$4.43


By Amy D’Onofrio

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